A ‘payment institution’ is defined in the Payment Services Directive (“the Directive”) as a legal person (i.e. must be incorporated - sole traders cannot be authorised) that has been granted authorisation in accordance with Article 10 of the Directive to provide and execute payment services throughout the European Community.
The Directive will be effective in Ireland on 1 November 2009 and subject to the implementation of the European Communities (Payment Services) Regulations, the Irish Financial Services Regulatory Authority (“Financial Regulator”) will be the competent authority for the purpose of implementation of the Directive.
Payment institutions must obtain authorisation from the Financial Regulator in order to provide payment services. The provisions of the Directive will apply to persons providing ‘payment services’.
A ‘payment service’ is defined in the Directive as:
1. Services enabling cash to be placed on a payment account as well as all the operations required for operating a payment account.
2. Services enabling cash withdrawals from a payment account as well as all the operations required for operating a payment account.
3. Execution of payment transactions, including transfers of funds on a payment account with the user's payment service provider or with another payment service provider:
- execution of direct debits, including one-off direct debits
- execution of payment transactions through a payment card or a similar device
- execution of credit transfers, including standing orders
4. Execution of payment transactions where the funds are covered by a credit line for a payment service user:
- execution of direct debits, including one-off direct debits
- execution of payment transactions through a payment card or a similar device,
- execution of credit transfers, including standing orders.
5. Issuing and/or acquiring of payment instruments.
6. Money remittance.
7. Execution of payment transactions where the consent of the payer to execute a payment transaction is given by means of any telecommunication, digital or IT device and the payment is made to the telecommunication, IT system or network operator, acting only as an intermediary between the payment service user and the supplier of the goods and services.
Transitional provisions will apply to certain institutions, for example, where an institution commenced payment services activities before 25 December 2007. They may continue those activities without authorisation, however they will not be permitted to passport their activities until such time as they are authorised. The transitional provisions are set out in Article 88 of the Directive.
Copies of the Directive are available on the website of the European Commission at http://ec.europa.eu/internal_market/payments/framework/index_en.htm